The new tax law has come with mixed feelings. On the one hand, it clearly tries to simplify and protect small businesses, while on the other hand, it creates panic because entrepreneurs always have trouble implementing new rules.
This article is aimed at every micro or small business owner in Nigeria. I’ll discuss the actual changes to your cash and compliance, what they mean, and specific steps you can take this week to protect your profits and avoid penalties.
What changed, and why does it matter?
The package of tax reform laws was signed into law by the federal government in June 2025 with the intended unification and modernization of Nigeria’s tax code. Among such reforms are the Nigeria Tax Act, which consolidates all tax laws, and a Tax Administration Act that will create a more standardized framework for revenue collection. These measures are aimed at raising more revenue, reducing loopholes, and creating efficiency in tax administration.
Why it matters to small businesses: The reforms rewrite the lines between who, require more transparent reporting, and introduce digital compliance tools. All this affects both the costs of doing business and the administrative burden on small operators. Short story: less tax for a lot of people and more paperwork.
Benefits to small businesses
Let us start with the good news here. The reforms do not merely impose conditions, but actually provide relief to small companies. From increased exemption thresholds to easier taxation for levies, it’s a well-deserved break for some.
- Tax exemption limit for small companies: A major victory is the new tax exemption limit for small companies. According to the new regulation, a company can qualify for a corporate income tax if its annual turnover is below a certain threshold (widely reported as $50 million). In other words, small local companies will not face any CIT at the end of the year. This is really a straightforward cash flow benefit for many micro and small businesses.
- Streamlining levies and simplified tax categories: Many small levees have been replaced with clarifiers. Therefore, accidental double charging by different local agencies will be reduced. This simplifies bookkeeping, especially for micro businesses that track a lot of transactions.
- Targeted relief and exemptions for priority sectors and small operators: Small businesses in agriculture, manufacturing, and certain tech niches can now pursue targeted assistance programs (such as pioneer incentives) offered under the new government that recognize such sectors as “priority.” Thus opportunities arise to reduce effective tax rates through legally permitted incentives.
If you qualify as a small company under the business threshold, don’t assume you’ll be “left alone”. Keep in mind that you must be properly registered, maintain records, and file returns even if you owe nothing to the CIT, or penalties may apply. It should be thought of not as an automatic exemption but as a reward in accordance with the need for proof.
Challenges for small businesses
Despite the benefits, the adjustment is painful. The ultimate goal is to modernize small business owners, who now need to adapt to a data-driven and digital tax system that feels like a burden to newcomers.
- Mandatory registration and filing of all businesses: The new tax reforms call for universal registration, permanent use of tons, and mandatory filing even if the liability for tax is nil. This means that many informal traders who were operating without registration will now need to formally comply or face possible fines if they remain silent.
- E-Invoicing and VAT Financing: Currently, the government is putting digital tools in place to capture VAT and sales data, such as e-invoicing and financial instrument capture. Although quite beneficial, such systems may not come with the necessary facilities and training, or they may require third-party software, which is a heavy burden on small sellers, especially those who ply their trade in markets or rural areas.
- New taxes and broader bases for some benefits: Capital gains are changing as some gains that were outside the normal income tax rules (including some digital/virtual asset gains) are brought within the taxable base, and the corporate CGT rules were completely scrapped.
- Withholding tax and procedural updates: Withholding Tax (WHT) and the manner in which it is applied has been updated with the new tax authority rules. Such suppliers with correct tonnage and compliance status can minimize the impact of WHT. However, the new system is tightening the documentation requirements for collecting and crediting the withheld amount. WHT filings become the most common cause of disputes.
Reforms often change one complication for another. The safest approach to a short run is to get the basics right: register, get a ton, digitize receipts where possible, and keep clear records of sales and supplier invoices.
Practical Quick Steps for Small Business Owners
Keep in mind that tax compliance doesn’t have to be scary. There are things you can choose to do today that can avoid stress, penalties, and confusion tomorrow. This is how you get to beat the system under the new order:
- Register your ton and (or verify) get: If you don’t have one, get one, and if you do have one, it should be active and linked to your current business name. Many discounts and benefits require a valid ton.
- Review your business: Now, calculate your turnover for the last 12 months. If it’s below 50m, find out if you meet the definition of a small company (some rules also consider limits on fixed assets). If qualification exists, document the evidence so that a simple accounting ledger can be established to back up exemption claims.
- Start going digital for record keeping: Get started now with free or low-cost bookkeeping apps or just a well-designed Google Sheet. Make sure every sale is recorded, and every purchase has an invoice. If your business needs to issue e-invoices, work with your POS or accounting provider to quickly prepare yourself.
- Know your VAT status and charge VAT when necessary: If you are selling goods or services and are standard-rated, VAT still applies at 7.5% (due to parliamentary protection during debates). New to VAT registration, set aside a portion of these sales for remittances at a later time.
- Understand your business and withholding tax on payments from it: When you buy or receive payment from suppliers, and the payer deducts WHT, you must issue the correct documents and certificates that need to be collected. Without WHT credit, a huge opportunity to minimize liability is lost.
- Talk to your accountant about CGT exposure: When assets, intellectual property, or equity interests are sold from a business, the newly introduced capital gains rules may affect the amount of tax you are liable to pay. A quick check will avoid surprises when the year ends.
How these reforms affect most small business models
The profound effects of these reforms will of course vary across industries. Depending on whether you’re a retailer, online business owner, or professional service provider, the disruption can be anywhere from mild to a major upheaval in the way you do business.
- Market Stall or Retail Kiosk: Mostly positive if your business is small, as you will be exempt from paying tax. Key pain points are that marketplace merchants will need vendor or collection solutions to enable e-invoicing and electronic reports.
- Online Microstore/Social Commerce: VAT on digital services, potential tax on asset gains in the digital world, and invoice reminders for customers are some of the concerns that everyone in a business selling online needs to keep in mind.
- Freelancers/Sole Practitioners: If your practice is below this threshold and is formed as a small company, you benefit under the CIT exemption. However, personal income tax reform may change how personal wages are taxed. Always reconcile business and personal filings.
Mistakes to avoid
Even the best entrepreneurs can sometimes fall prey to the pitfalls of the legal field. Cleaning up from these basic mistakes, however, can save you both money and unnecessary trouble.
- The assumption that “no tax” also implies “no paperwork”. Generally filing for exemptions is required. Otherwise, there are penalties for non-filing.
- Combining personal funds and business funds. Without a clear distinction, it becomes almost impossible to prove business boundaries and claim immunity.
- Ignoring the WHT certificate. A missing certificate means you lose credit and pay more tax.
- Awaiting implementation. Among the tools that tax authorities have to detect non-compliance, registration is better than mandatory audit.
The result
Nigeria’s tax reforms are a mix of relief and modernization. For most small businesses, the good news is that clear thresholds and exemptions are in the headlines, which will hopefully reduce the tax burden. However, many of the improvements will also come in digital reporting, more stringent documentation, and a broader tax base in key areas, such as capital gains and digital assets.
For the small business owner reading this, the final practical advice would be: register, get your books in order, spend an hour with an accountant, and set aside 30 minutes per month to comply. These four steps will turn policy risk into predictable monthly tasks, and they’ll protect your cash and your time.